February 19, 2006
Committee on Commerce, Science, and Transportation
United States Senate
Washington, D.C. 20510
Dear Committee Members:
The power of competitive choice to produce lower prices and better services
for homeowners in the cable TV market has never been more visible than it is
today. Accordingly, the need for Congress to encourage new competition by
streamlining America’s unwieldy system of local video franchise regulations
has never been more urgent.
Consumers are not happy with the cable TV monopolies. They receive the
lowest consumer satisfaction ratings according to JD Powers. What the cable
TV companies do well is raise prices. Cable prices have increased nearly 60
percent since 1999, nearly triple the rate of inflation, and there’s no
reason to believe they won’t continue as long as they can maintain their
monopolies.
Only 2-3% of cable TV markets have effective competitors. It is surprising
that there is no effective TV services competition in most markets, since
there is growing evidence that consumers can save a lot of money if we can
remove the barriers to new entrants. Several years ago the Government
Accountability Office found that prices were 15 percent lower in those areas
where the local cable TV company faces competition.
More recent data suggests that the GAO figures understate the potential
savings to consumers. In Keller, Texas, the incumbent cable provider dropped
their premium service package rates by 50% when a telephone company
announced plans to enter their market late last year, a price cut of $50 a
month or $600 a year. A recent Bank of America study found that in three
different markets the average annual TV services subscription price
reduction upon telephone company entry into cable TV markets was $242.23, or
36%.
These are very substantial potential savings for the average homeowner.
Steps to bring more competition to the cable TV monopolies and do it quickly
are fully justified based on these savings alone. They are not the only
benefits that will result from more TV services competition. The process
will accelerate the deployment of very high speed broadband, enabling more
employees to telecommute and more homeowners to start home based businesses,
reducing traffic and air pollution at the same time. It will speed
opportunities to save substantial amounts on medical costs through
integrated home based monitoring and intervention systems for patients with
chronic illnesses, enabling more seniors to spend more of their twilight
years in their own homes instead of nursing homes (this will also help
reduce the nation’s spiraling health care costs).
Cable competition should be the norm around the country instead of the
exception. The biggest obstacle to the rapid spread of competition is the
30-year old local franchising requirements that make it as difficult and
time-consuming as possible for consumers to benefit from the substantial
savings competition can bring to the market. Although some local
governments, to their great credit, have welcomed new competitors, the cable
TV lobby is thwarting the process in many markets, and in others local
governments are either dragging their feet or putting their own self
interests ahead of their constituents. Analysts project that bringing the
benefits of competition to homeowners one locality at a time could delay
full competition by as much as 15 years.
The creation of national franchising rules need not hurt local governments.
Forward thinking local government leaders have already welcomed new
competitors into their markets. New policies to streamline the franchising
process can and should assure there is no income-based discrimination in the
deployment process and respect the role of state and local governments in
protecting the public interest. State and local authorities should continue
to manage public rights-of-way, ensure customer service and consumer
protection compliance, receive reasonable video services compensation and
reasonable access to capacity for public, educational, and governmental
programming.
Given the amount of potential immediate savings, American homeowners should
not have to wait 15 years for the benefits competitive choice in cable
services can obviously bring. The faster competition is introduced into the
cable market, the faster cable TV rates will be reduced and America’s
consumer broadband infrastructure will be expanded. As the Commerce
Committee develops new telecom legislation it should include plans to
replace the current system of local cable franchising with a more efficient
and competition-friendly system as soon as possible.
Sincerely,
Bruce N. Hahn, President
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